Geopolitical Monitoring Report | July 25, 2022

Europe & Eurasia | Canada/Germany/Russia

Nord Stream 1: Canada to return repaired Russian pipeline part to Germany: DW

Background:

Canada announced that it will grant an exemption from its current sanctions on Russia to return a turbine for the Nord Stream I pipeline that it repaired. Germany – who is facilitating the transfer of the part back to Russia – relies heavily on the Nord Stream I pipeline for its natural gas supplies and the Kremlin has alleged that maintenance issues related to the turbine are responsible for its recent moves to cut 40% of Germany’s gas supply.

The cut in shipments forced Germany to activate the second stage of its gas rationing plan and prompted Berlin to pressure Canada to facilitate the return of the part, which was being repaired by the Canadian subsidiary of the German company Siemens.

The maintenance on the pipeline is scheduled to be complete on July 21 now that the turbine has been returned to Russian, however, the Kremlin may decide to continue the gas shutdowns as a way to pressure Germany into accepting Moscow’s eventual terms for ending the war in Ukraine.

Gas shipments cuts of this magnitude would result in the German government instituting their rationing plan that would result in Europe’s largest economy plunging into a recession as a result of the shortages.

Impact:

While it is unclear if Russia is planning on keeping the Nord Stream I pipeline closed after maintenance is scheduled to conclude on July 21, it is clear that the German government is preparing for that eventuality and regards it as a likely outcome.

Berlin will likely move to source natural gas from alternative suppliers, but it will take time to ramp up supplies of liquified natural gas shipments from floating offshore terminals and plans by the EU to replace Russian energy with oil and natural gas sourced from Africa have met resistance due in part to the bloc’s refusal to invest in fossil fuel infrastructure in Africa.

Further complicating Germany’s – and more broadly the entire EU’s – plans to replace Russian natural gas shipments is the uptick in cyberattacks on commodities infrastructure that has occurred since the Russian invasion of Ukraine, with many of these attacks being launched by advanced persistent threat actors that have either pledged allegiance to or are affiliated with the Kremlin.

It is possible that Russia will covertly instruct or encourage these actors to target energy infrastructure in Germany and throughout Europe in order to ensure its gas cutoffs have maximum effect.

Mitigation:

Energy companies that have operations in Europe or are involved in the transport of energy to the continent should take action to ensure they are monitoring possible threats targeting their operations. This threat will remain high until the conclusion of the war in Ukraine.

The primary targets of any cyber offensive against energy suppliers will be aimed at companies engaged in the shipping of fossil fuels, but alternative energy companies may also eventually be targeted.

The Kremlin is also likely to launch disinformation campaigns on social media platforms aimed at placing the blame for any potential gas cutoff on Western sanctions and encourage local populations that are bearing the brunt of the shortages to pressure their governments to negotiate an end to the Ukraine war on Russia’s terms.

Social media platforms should be aware of these potential threats and work to identify platform abuse in order to not become an unwitting participant in these efforts.

South Asia | Sri Lanka

Protesters storm Sri Lanka’s presidential palace, set prime minister’s home ablaze: Axios

Background:

Protesters angered by the government’s economic mismanagement, food, and fuel shortages stormed the Presidential Palace and torched the Prime Minister’s home on Saturday, June 9. President Gotabaya Rajapaksa fled the country and Prime Minister Ranil Wickremesinghe announced that he will resign when an all-party unity government is formed.

Wickremesinghe only recently began his fifth term as the country’s prime minister after protests forced Rajapaksa’s brother from the position back in May, and has frequently been viewed as a member of the country’s political establishment by the protesters. The storming of these buildings by the protesters, Rajapaksa reportedly fled the country after resigning, and Wickremsinghe’s announcement of his impending resignation came shortly after the government failed to negotiate a deal with the International Monetary Fund to restructure the country’s debt and talks with the lender broke down.

China – which has lent large sums of money to Sri Lanka as part of its Belt and Road Initiative – has not stepped up to provide economic aid to the embattled country. The country’s economic crisis has its origins in government policies that mandated organic farming, increased government debt due to the impact of the COVID-19 pandemic, and rising fuel and food costs due to the Russian invasion of Ukraine which led to a foreign reserve crisis that resulted in the country being unable to pay for essential imports.

This has caused the worst financial crisis in the country’s history and led to it defaulting on its foreign debt obligations due to its foreign reserve shortage. Protests over shortages of food, medicine, and fuel have further hampered the country’s economic recovery, as rescue loans and restructuring of the country’s debt are contingent on stability in the country’s political system.

Impact:

The storming of the country’s presidential palace and the effective collapse of its government means that it is unlikely that Sri Lanka will be able to resume talks to restructure its debt in the near future, as it will take time to establish the new unity government and they will then have to restart negotiations with the IMF and other lenders.

This will naturally take time and the process could face additional delays, as protests are likely to continue amid the ongoing shortages of daily essentials. This could lead to government actions like blocking social media – like it did when the protests began in April – or internet access in order to prevent additional protests from organizing.

Finally, the situation in Sri Lanka is likely to be replicated in other low-income countries that have high foreign debt loads, import a significant amount of food and fuel, and have unstable political systems. The UN World Food Program (WFP) reports that 38 countries are currently at risk of famine or severe food insecurity.

In addition to concerns about civil unrest and foreign debt defaults, many of the countries identified by the WFP as being at risk for famine already have significant violent conflicts ongoing within their territory against extremist groups. There is a risk of these conflicts becoming worse, as non-state violent actors may weaponize food production and distribution in areas they control.

While the impacts of rising costs and interest rates may not result in impacts as severe as those seen in Sri Lanka, protests over rising prices could result in governments forgoing infrastructure investments to address the crisis or attempting to shift blame to foreign firms in the country. There is also the risk that these protests – which are targeted at the country’s elite – could inspire protests or backlash against corporate executives or high net worth individuals.

Nisos researchers have already observed chatter on social media platforms where potential threat actors have stated that what occurred in Sri Lanka is a “solution” for those who have grievances with financial markets, hedge funds, and Wall Street. We assess that such sentiments are only likely to rise as the global economy continues to slow and organizations that may be the targets of such ire should take actions to ensure the safety of their facilities, employees, and executives.

Mitigation:

Organizations that have operations or source goods from countries that are at risk of facing similar scale civil unrest stemming from rising food and fuel prices in low-income countries that have high debt loads should take steps to ensure they can identify the warning signs early and ensure they have a plan to mitigate the impacts.

The first step is for these organizations to develop an understanding of the countries where they operate and determine if these investments are still viable.

Monitoring social media in countries that they have identified as being particularly vulnerable would likely be the most effective way to identify the early warning signs of civil unrest and could provide an organization with the ability to mitigate its impact.

Finally, organizations should be prepared to mitigate the impact of communications networks and internet access being shut down by government authorities in countries that permit these actions.

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